Social Benefit Bonds: Make a difference and a profit

Can a program to reduce the number of children in foster care ever be an appealing investment proposition for the private sector? The NSW government thinks so.

In an Australian first, NSW Treasury is trialling social benefit bonds to attract private funds into social programs aimed at reducing foster care and preventing young repeat offenders from returning to prison.

Social benefit bonds emerged out of the UK, where they are known as "social impact bonds", and are about to be trialled in New York and Massachusetts in the US.

In the social benefit bond model, private investors replace government in providing up-front funding to not-for-profit organisations (NFPs) to deliver community programs. Government only pays for the ongoing costs of the program which includes regular repayments to the private investors.